UK - The £8bn (€10bn) West Midlands Pension Fund has confirmed it is investing appxoximately a quarter of its portfolio in alternative assets.

Judy Saunders, the chief investment officer at the pension fund, told IPE the fund has allocated 7% to private equity, 7% to direct UK real estate, 3% to overseas property equity funds, 2% in emerging market debt, 2% in infrastructure, 1% in active currency and 3% in commodities.

The 25% allocation is for purposes of diversification and is part of the fund's approach to risk management, said Saunders.

"We also believe that alpha is more likely to be generated by alternatives as opposed to the traditional asset classes," she added.

The fund has decided against investing in hedge funds, since it believes the base fees need to be lower to reflect the beta.

"I am more than happy to pay performance fees after a certain hurdle has been achieved as this serves the interests of both parties," said Saunders.
The latest move is part of a diversification process begun in 2004, and on the back of a more wide-ranging review last year.

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